Fels panel loses confidence in 7-Eleven amid claims worker beaten

Exploited 7-Eleven workers are still being forced to hand pay back to their bosses and at least one has been beaten for complaining, prompting former competition tsar Alan Fels to tell a Senate inquiry he has lost confidence in the company's ability to deal with the scandal.

Deloitte partner Siobhan Hennessy, a member of the Fels Wage Fairness Panel set up by the company to investigate the scandal, told senators in Canberra that a worker had been beaten for contacting the panel, saying that "the intimidation has gone to levels that are very worrying".

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More pain for 7 Eleven staff

Revelations have been made that 7-Eleven staff are still being underpaid and intimidated to hand over cash to their bosses.

The hearing also heard testimony from former 7-Eleven chairman Russ Withers, current chairman Mike Smith and interim chief executive Bob Baily that up to 500 current workers were still being underpaid.

Back-pay claims related to the scandal were on track to reach up to $50 million in what Senator Sue Lines described as the largest back-pay claim in Australia's history.

The Senate hearing also heard Fair Work Ombudsman Natalie James call for powers to bring criminal charges for serious breaches of workplace law. After the hearing, Greens senator Janet Rice, and the ALP's Deborah O'Neill and Sue Lines flagged their parties' intention to beef up the ombudsman's powers.

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The explosive revelation about the scale of the "cash-back" scheme – where an employee is paid properly but then forced to hand back half their pay to their bosses –and head office leaking information to franchisees, was made by panel co-chairman Professor Allan Fels at the Senate hearing.

"We're received a number of consistent reports from claimants that since the revelation of the scandal ... franchisees who were operating under the half-pay scheme are now operating under the cash-back scheme," Professor Fels said.

"Right now this cash-back scheme is happening on a large scale," he said.

Professor Fels also said in some instances he had lost confidence in the company's ability to stamp out poor franchisee behaviour.

"We've had a loss of confidence in 7-Eleven, in the information we have given to them and they've given to regional managers," Professor Fels said.

Cash back and intimidation is a revolting practice. We are embarrassed by it and we will stop it,

Mike Smith

Senator Lines asked Professor Fels whether he was saying there was "a racket going on here?".

Professor Fels replied: "Yes, I think it's fair to say that".

He said the company had to act "more quickly, more boldly", adding: "They need to move on some of their regional managers".

Professor Fels' panel has written to 20,000 7-Eleven workers but responses, now received from more than 2000 workers, were being hamstrung by intimidation of staff by store owners.

The remarkable revelation came after Messrs Withers, Smith and Baily were grilled over the widespread underpayment of workers, including some who had pocketed as little as $5 an hour.

Mr Smith confirmed that two franchisees in Perth had been kicked out of the 7-Eleven system during the cash-back scam. 7-Eleven has seven stores in Western Australia.

Mr Withers said he remained deeply sorry for the scandal but added the company had worked hard to change its model to ensure franchisees received more money to allow the full payment of wages.

"We've had the claims tribunal active for four or five months. The numbers we're presently talking about, if it's between $40 million and $50 million, the company has the capacity to pay," Mr Withers said, responding to questions from Senator Bridget MacKenzie

Mr Baily told the hearing 1350 current and former 7-Eleven workers had made 1492 claims to the panel, including 500 claims from current workers at 7-Eleven stores, a fact senators at the hearing described as deeply concerning.

"Of those who have been processed, there's 188 for a total of $4 million," Mr Baily said. However,he added that so far only 97 workers had been paid, in claims totalling a bit more than $2.8 million.

Mr Withers was challenged by Senator Deborah O'Neill over the fairness of the company's new franchise model, with the ALP senator saying she had been contacted by franchisees who were concerned they would go bankrupt under the new model.

Mr Smith said the company was aware some franchisees were engaging in the cash-back scam.

"Cash back and intimidation is a revolting practice. We are embarrassed by it and we will stop it," he said.

Professor David Cousins, who co-chairs the Fels Wage Fairness Panel, said 7-Eleven had been told about the scale of the cash-back scam.